Filed Pursuant to Rule 424(b)(3)
Registration No. 333-88448
CTS CORPORATION
1,246,699 SHARES
OF
COMMON STOCK
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This prospectus relates to the offering of the shares of our common stock
issuable upon conversion of our outstanding 6 1/2% Convertible Subordinated
Debentures. Selling stockholders may offer common stock at fixed prices, at
prevailing market prices at the time of sale, at varying prices or at negotiated
prices. CTS will not receive any cash proceeds from the selling stockholders'
sales of these shares of common stock.
THE COMMON STOCK
- Our common stock is listed on the New York Stock Exchange under the
symbol "CTS."
- On June 3, 2002, the last reported sale price of our common stock was
$14.90.
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AS A PROSPECTIVE PURCHASER OF THESE SECURITIES, YOU SHOULD CAREFULLY
CONSIDER THE DISCUSSION OF "RISK FACTORS" THAT BEGINS ON PAGE 3 OF THIS
PROSPECTUS.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THE COMMON STOCK TO BE DISTRIBUTED UNDER THIS
PROSPECTUS, NOR HAS ANY OF THESE ORGANIZATIONS DETERMINED THAT THIS PROSPECTUS
IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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The date of this prospectus is June 5, 2002
REFERENCES TO ADDITIONAL INFORMATION
In this prospectus, unless otherwise indicated or the context otherwise
requires, "CTS", "we", "us" and "our" refer to CTS Corporation and its
consolidated subsidiaries. This prospectus incorporates by reference important
business and financial information about us that is not included in or delivered
with this prospectus. You may obtain documents that we filed with the Securities
and Exchange Commission and incorporated by reference into this prospectus by
requesting the documents, in writing or by telephone, from the Securities and
Exchange Commission or from:
CTS Corporation
905 West Boulevard North
Elkhart, Indiana 46514
Attn: Vice President Investor Relations
Telephone: (574) 293-7511
See "VIII. Where You Can Get More Information."
TABLE OF CONTENTS
I. SUMMARY 1
A. CTS 1
B. Use of Proceeds 2
C. The Common Stock 2
II. RISK FACTORS 3
A. Risk Factors Relating to CTS 3
B. A Warning About Forward-Looking Statements 8
III. USE OF PROCEEDS 8
IV. SELLING STOCKHOLDERS 8
V. PLAN OF DISTRIBUTION 10
VI. LEGAL MATTERS 11
VII. EXPERTS 11
VIII. WHERE YOU CAN GET MORE INFORMATION 11
A. Available Information 11
B. Incorporation of Documents by Reference 11
i
I. SUMMARY
This summary highlights basic information about CTS and the common stock
being offered by the selling stockholders, but does not contain all information
that may be important to you. You should carefully read the more detailed
information and consolidated financial statements and the related notes
appearing elsewhere and incorporated by reference in this prospectus.
A. CTS
We are a global electronic components and electronic assemblies
manufacturer. We were established in 1896 as a provider of high-quality
telephone products and were incorporated as an Indiana corporation in February
1929. Our principal executive offices are located at 905 West Boulevard North,
Elkhart, Indiana 46514, telephone (574) 293-7511. We maintain a website at
http://www.ctscorp.com. The information on our website is not incorporated into,
and is not a part of, this prospectus.
We design, manufacture, assemble and sell a broad line of electronic
components and custom electronic assemblies primarily for the communications,
computer and automotive markets. We operate manufacturing facilities located
throughout North America, Asia and Europe. Our product lines serve major markets
globally, focused primarily on the needs of original equipment manufacturers. We
sell and market our products through our sales engineers, independent
manufacturers' representatives and distributors.
We have two reportable business segments: electronic components and
electronic assemblies. Electronic components are products that perform the basic
level electronic function for a given product family for use in customer
assemblies.
Electronic components consist principally of:
- quartz crystals and oscillators and ceramic filters used in cellular
handsets, and public infrastructure and networking for the
communications market;
- automotive sensors and actuators used in the automotive market;
- ClearONE(TM) terminators used in the computer market; and
- potentiometers, resistor networks and switches used to serve multiple
markets.
Electronic assemblies are combinations of electronic components or
electronic and mechanical components that, apart from the assembly, may
themselves be marketed as separate, stand-alone products. These assemblies
represent completed, higher-level functional products to be used in customer end
products or assemblies. These products consist principally of:
- interconnect products such as integrated interconnect systems and
backpanels used in mass data storage systems, internet access systems
and network servers used in the computer market, and base station
infrastructure equipment used in the communications market;
- radio frequency integrated modules used in cellular handsets;
- pointing sticks/cursor controls for personal computers for the
computer market; and
- low temperature cofired ceramics for applications such as global
positioning system devices and Bluetooth communications products for
the communications market.
Products within each business segment are principally sold into three major
original equipment manufacturer markets: 1) communications, 2) computer and 3)
automotive. Other smaller original equipment manufacturer markets include 1)
consumer electronics, 2) instruments and controls and 3) defense/aerospace.
1
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B. USE OF PROCEEDS
We will not receive any cash proceeds from the sale of the shares of common
stock being offered by the selling stockholders.
C. THE COMMON STOCK
SECURITIES OFFERED.................... 1,246,699 shares of CTS common stock,
subject to adjustment. These shares
will be issued upon conversion of our
outstanding 6 1/2% Convertible
Subordinated Debentures, which were
issued by us in a private placement
transaction in April 2002.
NEW YORK STOCK EXCHANGE
SYMBOL FOR COMMON STOCK............... CTS.
RISK FACTORS.......................... You should carefully read the "Risk
Factors" section beginning on page 3 of
this prospectus as well as the other
cautionary statements throughout the
entire prospectus, to ensure that you
understand the risks associated with an
investment in the common stock.
2
II. RISK FACTORS
Investing in our common stock involves significant risks. Before making an
investment, you should read and carefully consider the risks and uncertainties
described below. The risks and uncertainties we describe are not the only ones
we face. Additional risks and uncertainties not currently known to us or that we
currently consider immaterial may also affect our business operations. If any of
the following risks actually occur, our business, results of operations and
financial condition could be materially adversely affected, and you could lose
all or part of your investment.
A. RISK FACTORS RELATING TO CTS
1. WE MAY BE UNABLE TO KEEP UP WITH RAPID TECHNOLOGICAL CHANGES WHICH COULD
MAKE SOME OF OUR PRODUCTS OR PROCESSES OBSOLETE BEFORE WE REALIZE A RETURN
ON OUR INVESTMENT.
The technologies relating to our research and development activities have
undergone rapid and significant technological development. Specifically, the
market for products in the communications industry is characterized by
technological change, frequent new product introductions and enhancements,
changes in customer requirements and emerging industry standards. The
introduction of products embodying new technologies and the emergence of new
industry standards could render our existing products obsolete and unmarketable
before we can recover any or all of our research, development and
commercialization expenses. The life cycles of our products are difficult to
estimate.
Our future success will depend upon our ability to develop and introduce
new products and product enhancements on a timely basis that keep pace with
technological developments and emerging industry standards and address
increasingly sophisticated requirements of our customers. We may be unsuccessful
in developing and marketing new products or product enhancements that respond to
technological changes or evolving industry standards. We also cannot assure you
that we will not experience difficulties that could delay or prevent the
successful development, introduction or marketing of these new products or
product enhancements, or that our new products or product enhancements will
adequately meet the requirements of the marketplace and achieve market
acceptance. If we are unable, for technological or other reasons, to develop and
market new products or product enhancements in a timely and cost-effective
manner, our business, results of operations and financial condition could be
materially adversely affected.
2. BECAUSE A SUBSTANTIAL PORTION OF OUR SALES COMES FROM CUSTOMERS IN THE
COMMUNICATIONS, COMPUTER AND AUTOMOTIVE INDUSTRIES, WE ARE SUSCEPTIBLE TO
TRENDS AND FACTORS AFFECTING THOSE INDUSTRIES.
Net sales to the communications, computer and automotive industries
represent a substantial portion of our revenues. Factors negatively affecting
these industries and the demand for their products, also negatively affect our
business, results of operations and stock price. Any adverse occurrence,
including industry slowdown, recession, political instability, armed
hostilities, terrorism, excessive inflation, prolonged disruptions in one or
more of our customers' production, or labor disturbances, that results in a
significant decline in the volume of sales in these industries, or in an overall
downturn in the business and operations of our customers in these industries,
could have a material adverse effect on our business, results of operations and
financial condition. For example, the trend toward consolidation in the
communications and computer industries could result in a lower level of
acceptance of our products, reduced product requirements, purchasing delays by
the combined entity or the loss of a customer. Also, the automotive industry is
generally highly unionized and some of our customers have, in the past,
experienced labor disruptions. Furthermore, the automotive industry is highly
cyclical in nature and sensitive to changes in general economic conditions.
3. BECAUSE A SIGNIFICANT PORTION OF OUR SALES CURRENTLY COMES FROM A SMALL
NUMBER OF CUSTOMERS, ANY DECREASE IN SALES FROM THESE CUSTOMERS COULD
ADVERSELY AFFECT OUR OPERATING RESULTS.
We depend on a small number of customers for a large portion of our
business, and changes in the level of our customers' orders have, in the past,
had a significant impact on our operating results. If a major customer reduces
the amount of business it does with us, there would be an adverse impact on our
operating results. Our 15 largest customers represent a substantial portion of
our sales. Our two largest customers in recent periods were Compaq Computer
Corporation and Motorola, Inc.
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We expect to continue to depend on sales to our major customers. Some of
our customers are increasingly outsourcing their purchasing activities, placing
a greater emphasis on cost while maintaining an emphasis on quality. Since it is
difficult to replace lost business on a timely basis, it is likely that our
operating results would be adversely affected if one or more of our major
customers were to cancel, delay or reduce a large amount of business with us in
the future. If one or more of our customers were to become insolvent or
otherwise unable to pay for our services, our business, results of operations
and financial condition could be adversely affected.
4. WE FACE RISKS RESULTING FROM THE GLOBAL ECONOMIC SLOWDOWN.
The global economic downturn has slowed demand in the CTS-served
communications, computer and automotive markets. These markets for our
electronic components and assemblies have softened and may continue to soften.
As a result, our revenues and earnings have been negatively affected and this
softening demand may create pricing pressures which could further negatively
affect our revenues and earnings.
Further deterioration of revenues and earnings, beyond current levels,
could have a negative effect on our business, results of operations and
financial condition. This could also have a negative effect on the price of our
common stock and could also make it difficult for us to service our debt and to
comply with the covenants in our credit facility and our other indebtedness,
including any debentures that have not been converted to common stock. Violation
of the covenants in our credit facility could require us to pay substantial fees
to our banks until the violation is corrected or result in an event of default
under our credit facility. In the event the violation cannot be corrected, we
could be required to negotiate a new credit facility with a new bank group or
raise equity or additional debt in public or private transactions.
5. WE FACE RISKS RELATING TO THE SUCCESS OF OUR RESTRUCTURING, CONSOLIDATION
AND COST REDUCTION PLAN.
During 2001, we recorded $40 million of pre-tax restructuring and
impairment charges relating to a plan to realign our operations, $14 million of
which we recorded in the second quarter and $26 million of which we recorded in
the fourth quarter. We began to implement the plan during the second quarter of
2001. The plan was designed to permit us to operate more efficiently in the
then-prevailing environment and, at the same time, to allow us to be well
positioned as the economy improves.
The restructuring plan is proceeding on schedule. However, anticipated
savings were based on revenue volumes and mix experienced during the fourth
quarter of 2000 instead of revenue volumes expected at the time the plan was
implemented. If the expected revenue volumes are not met during the next two
fiscal years, some of the expected savings may be delayed or not achieved.
Additional restructuring activities and related charges may be required in
the event that the business environment deteriorates further, estimated proceeds
from expected asset sales are reduced, or we identify other areas for cost
savings.
6. BECAUSE WE HAVE SIGNIFICANT NON-U.S. OPERATIONS, OUR FINANCIAL CONDITION
AND OPERATING RESULTS COULD BE ADVERSELY AFFECTED BY ECONOMIC, POLITICAL,
REGULATORY AND OTHER FACTORS EXISTING IN NON-U.S. COUNTRIES IN WHICH WE
OPERATE.
We have substantial international operations. Our international operations
are subject to inherent risks, including:
- political and economic instability in countries in which we have
manufacturing facilities;
- expropriation;
- currency controls;
- changes in government regulation;
- high levels of inflation;
- changes in labor conditions and difficulties in staffing and managing
our non-U.S. operations;
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- greater difficulty in collecting our accounts receivable and longer
payment cycles;
- less favorable intellectual property laws;
- increases in the duties and taxes we pay;
- exposure to different legal standards; and
- fluctuations in exchange rates.
In addition, these same factors may also place us at a competitive
disadvantage to some of our non-U.S. competitors. All of these risks have
affected and may continue to affect our business, results of operations and
financial condition.
7. WE FACE RISKS RELATING TO THE PROTECTION OF OUR INTELLECTUAL PROPERTY.
The success of our business depends, in part, upon our ability to protect
trade secrets, copyrights and patents, obtain or license patents and operate
without infringing on the rights of others. We rely on a combination of trade
secrets, copyrights, patents, nondisclosure agreements and technical measures to
protect our proprietary rights in our products and technology. The steps taken
by us in this regard may not be adequate to prevent misappropriation of our
technology, and our competitors may independently develop technologies that are
substantially equivalent or superior to our technology. In addition, the laws of
some non-U.S. countries do not protect our proprietary rights to the same extent
as do the laws of the United States. Although we continue to evaluate and
implement protective measures, we cannot assure you that these efforts will be
successful.
We believe that patents will play an increasingly important role in our
commercial business. However, we cannot assure you that any issued patent will
provide us with any competitive advantages, that the patents will not be
challenged by third parties or that the patents of others will not adversely
affect our ability to do business.
There is also a risk that infringement claims may be brought against us or
our customers in the future. If someone does successfully assert an infringement
claim, we may be required to spend significant time and money to develop a
product or process that does not infringe upon the rights of that other person
or to obtain licenses for the technology, process or information from the owner.
We may not be successful in the development, or licenses may not be available on
commercially acceptable terms, if at all.
8. WE MAY BE UNABLE TO COMPETE EFFECTIVELY AGAINST LARGER COMPANIES.
We operate in a highly fragmented and competitive industry. We compete
against many domestic and non-U.S. companies, some of which have substantially
greater manufacturing, financial, research and development and marketing
resources than we do. Although no single competitor competes with us along all
product lines, we compete with a variety of suppliers with respect to different
subsets of our products. Additionally, many of our customers are seeking to
consolidate their business among one or more preferred or qualified suppliers.
If any customer becomes dissatisfied with our prices, quality or timeliness of
delivery, among other things, it could award future business or move existing
business to our competitors. Moreover, some of our customers could choose to
manufacture and develop particular components themselves rather than purchase
them from us. Increased competition could result in price reductions, reduced
profit margins and loss of market share, each of which could adversely affect
our business, results of operations and financial condition. In addition, some
of our competitors have engaged in merger and acquisition transactions.
Consolidations by competitors are likely to create entities with increased
market share, customer bases, proprietary technology and marketing expertise and
expanded sales force size. These developments may adversely affect our ability
to compete against these competitors, many of which are significantly larger and
have greater financial and other resources. We cannot assure you that our
products will continue to compete successfully with our competitors' products.
9. CUSTOMER PRESSURE TO REDUCE PRICES MAY CAUSE REDUCTIONS IN SALES OR PROFIT
MARGINS.
Many of our customers are under pressure to reduce the price of their
products or services, and, therefore, we expect to continue to experience
pressure from our customers to reduce the prices of our products. In many of our
markets, average sales prices of established products have declined in the past.
We anticipate that prices will
5
continue to decline, which could negatively impact our sales and/or gross profit
margins. Accordingly, to remain competitive, we believe that we must continue to
develop product enhancements and new technologies, and improve manufacturing
efficiencies, that will slow the price declines of our products or reduce the
cost of producing and delivering our products. If we fail to do so, our
business, results of operations and financial condition would be adversely
affected.
10. WE ARE SUBJECT TO A VARIETY OF ENVIRONMENTAL LAWS THAT EXPOSE US TO
POTENTIAL FINANCIAL LIABILITY.
Our operations are regulated under a number of federal, state and non-U.S.
environmental and safety laws and regulations that govern, among other things,
the discharge of hazardous materials into the air and water as well as the
handling, storage and disposal of these materials. These laws and regulations
include the Clean Air Act, the Clean Water Act, the Resource, Conservation and
Recovery Act and the Comprehensive Environmental Response, Compensation and
Liability Act, as well as analogous state and foreign laws. Compliance with
these environmental laws is a major consideration for us because we use
hazardous materials in our manufacturing process. In addition, because we are a
generator of hazardous wastes, we, along with any other person who arranges for
the disposal of our wastes, may be subject to financial exposure for costs
associated with an investigation and any remediation of our former and existing
manufacturing sites, as well as sites at which we have arranged for the disposal
of hazardous wastes, even if we fully comply with applicable environmental laws.
If we violate environmental laws, we could be liable for fines, damages and
costs of remedial actions and could also be subject to revocation of our
environmental permits. Any revocation could require us to cease or limit
production at one or more of our facilities, thereby negatively impacting our
revenues and potentially causing our common stock price to decline.
Environmental laws, including environmental laws in the European Union and other
non-U.S. countries, could also become more stringent over time, imposing greater
compliance costs and increasing risks and penalties associated with any
violation, which also could negatively impact our business, results of
operations and financial condition.
11. THE PRICE OF OUR COMMON STOCK HAS BEEN VOLATILE AND MAY CONTINUE TO
FLUCTUATE SIGNIFICANTLY.
The market price for our common stock has been and may continue to be
volatile. From January 3, 2000 to June 3, 2002 the last sale price of our
common stock ranged from a low of $13.30 per share to a high of $80.50 per
share. We expect our stock to continue to be subject to fluctuations as a result
of a variety of factors, including factors beyond our control. These include:
- changes in financial estimates by securities analysts;
- changes in market valuations of related companies;
- announcements by us or our competitors of new products or
technological innovations or of significant acquisitions, strategic
partnerships or joint ventures;
- general and industry stock market conditions, particularly in the
communications industry;
- general U.S. and worldwide economic conditions;
- conditions in our industries such as competition, demand for services
and technological advances;
- changes in our revenues and earnings;
- changes in our customer base, including any loss of a major customer,
and our contracts with customers;
- introduction and market acceptance of our customers' new products and
changes in demand for our customers' existing products;
- effectiveness in managing our manufacturing processes and related
assets, including our inventory and fixed assets;
- adverse or unfavorable publicity regarding us or our products;
- additions or departures of key personnel;
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- any deviations in net revenues or in losses from levels expected by
securities analysts; and
- future sales of common stock.
We may fail to meet expectations of our shareholders or of analysts at some
time in the future, and our stock price could decline as a result.
In addition, sales of a substantial number of shares of our common stock in
the public market, or the appearance that such shares are available for sale,
could adversely affect the market price for our common stock.
12. OUR CREDIT FACILITY CONTAINS PROVISIONS THAT COULD MATERIALLY RESTRICT OUR
BUSINESS.
Our credit facility contains a number of significant covenants that, among other
things, restrict our ability to:
- dispose of assets;
- incur additional debt;
- guarantee third-party obligations;
- repay other debt or amend other debt instruments;
- create liens on assets;
- enter into capital leases;
- make investments, loans or advances;
- make acquisitions or engage in mergers or consolidations;
- make capital expenditures; and
- engage in specified transactions with our subsidiaries and affiliates.
In addition, under our credit facility, we are required to meet a number of
financial ratios and tests. Our ability to comply with these covenants may be
affected by events beyond our control. If we breach any of these covenants or
restrictions, it could result in an event of default under our credit facility.
Any breach might permit our lenders to declare all amounts owing thereunder to
be due and payable, and our senior lenders could terminate their commitments to
make further extensions of credit under our credit facility. Additionally, if we
were unable to repay debt to our secured lenders, they could proceed against the
collateral securing the debt.
13. ANTI-TAKEOVER PROVISIONS COULD DELAY, DETER OR PREVENT A CHANGE IN CONTROL.
We are an Indiana corporation subject to Indiana state law. Some of these
state laws could interfere with or restrict takeover bids or other
change-in-control events affecting us. One statutory provision prohibits us,
except under specified circumstances, from engaging in specified business
combinations, including any merger, sale of assets or recapitalization with any
shareholder who owns 10% or more of our common stock or any affiliate of that
shareholder.
We have opted out of Indiana's "control share acquisition" provisions,
which restrict the voting rights of shares acquired in transactions which cause
the beneficial owner of the shares to exceed specified ownership thresholds. We
could, however, by action of the board of directors, elect to have those
provisions apply in the future.
In addition, our articles of incorporation allow us to issue up to
approximately 25 million additional shares of common stock (including the shares
issuable upon conversion of the debentures) and 25 million shares of preferred
stock without shareholder approval. The board of directors has the authority to
determine the price and terms under which the additional common or preferred
stock may be issued. Issuance of this common and preferred stock could make it
more difficult for a third party to acquire control of CTS.
7
Also, provisions in our articles of incorporation, bylaws, and other
agreements to which we are a party could delay, deter or prevent a change in
control of CTS. These provisions, alone or in combination with each other and
with the rights agreement described below, may discourage transactions involving
actual or potential changes in control, including transactions that otherwise
could involve payment of a premium over the prevailing market price to
shareholders for their common stock.
On August 28, 1998, our board of directors adopted a shareholder rights
agreement, pursuant to which uncertificated stock purchase rights were
distributed to our shareholders at a rate of one right for each share of common
stock held of record as of September 10, 1998, and each share issued thereafter.
The rights agreement is designed to enhance the board's ability to prevent an
acquirer from depriving shareholders of the long-term value of their investment
and to protect shareholders against attempts to acquire CTS by means of unfair
or abusive takeover tactics. However, the existence of the rights agreement may
impede a takeover of CTS not supported by the board, including a takeover that
may be desired by a majority of our shareholders or involving a premium over the
prevailing market price for our common stock.
B. OUR FORWARD-LOOKING STATEMENTS ARE SUBJECT TO A VARIETY OF FACTORS THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM CURRENT BELIEFS.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995: This prospectus contains "forward-looking statements" within the
meaning of the securities laws. These forward-looking statements are subject to
a number of risks and uncertainties, many of which are beyond our control. All
statements other than statements of historical facts included or incorporated by
reference in this prospectus regarding our strategy, future operations,
financial position, estimated revenues, projected costs, prospects, plans and
objectives of management are forward-looking statements. When used or
incorporated by reference in this prospectus, the words "will," "believe,"
"anticipate," "plan," "intend," "estimate," "expect," "project" and similar
expressions are intended to identify forward-looking statements, although not
all forward-looking statements contain these identifying words. Although we
believe that our plans, intentions and expectations reflected in or suggested by
any forward-looking statements are reasonable, we can give no assurance that
these plans, intentions or expectations will be achieved. Actual results may
differ materially from those stated in these forwarded-looking statements due to
a variety of factors, including those described above under "A. Risk Factors
Relating to CTS" and other risks and uncertainties described from time to time
in our reports filed with the Securities and Exchange Commission, including our
annual report on Form 10-K for the year ended December 31, 2001 and our
subsequent quarterly report on Form 10-Q.
We cannot guarantee that the results and events contemplated by
forward-looking information will in fact occur, and you should not rely unduly
on these forward-looking statements. We do not undertake any obligation to
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
III. USE OF PROCEEDS
All sales of the common stock issuable upon conversion of our outstanding 6
1/2% Convertible Subordinated Debentures will be by or for the account of the
selling stockholders listed in the following section of this prospectus. We will
not receive any cash proceeds from these sales of common stock.
IV. SELLING STOCKHOLDERS
All of the shares of common stock issuable upon conversion of our
outstanding 6 1/2% Convertible Subordinated Debentures are being offered by the
selling stockholders listed in the table below. Only those shares of common
stock issued upon conversion of the debentures may be offered by the selling
stockholders. We issued the debentures in April 2002 in a private placement
transaction exempt from registration under the Securities Act of 1933.
No offer or sale under this prospectus may be made by a holder of the shares
of common stock unless that holder is listed in the table below or until that
holder has notified us and a supplement to this prospectus has been filed or an
amendment to the registration statement has become effective. We will supplement
or amend this prospectus to include additional selling stockholders upon request
and upon provision of all required information to us.
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The selling stockholders may offer and sell, from time to time, any or all
of their common stock issued upon conversion of the debentures. The number of
shares of common stock that will ultimately be issued to the selling
stockholders cannot be determined at this time because it is dependent on
whether the holders of the debentures elect to convert all or part of their
debentures into common stock. The number of shares of common stock offered
pursuant to this prospectus have been calculated based on the current conversion
price of the debentures and assumes full conversion of all debentures held by
the selling stockholders. Because the selling stockholders may offer all or only
some portion of the shares of common stock listed in the table, no estimate can
be given as to the amount or percentage of the shares of common stock that will
be held by the selling stockholders upon termination of the offering.
The following table lists:
- the name of each selling stockholder;
- the number of shares of CTS common stock beneficially owned by that
holder before the offering; and
- the amount of common stock being offered for sale by that selling
stockholder.
The information in the table reflects the most recent information furnished
to us by the identified selling stockholder. Unless otherwise indicated, no
selling stockholder has indicated that it has held any position, office or other
material relationship with us or our affiliates during the past three years.
COMMON STOCK
------------
NUMBER OF NUMBER OF
SHARES SHARES
NAME OF SELLING STOCKHOLDER OWNED OFFERED
--------------------------- --------- ---------
Halifax Fund, L.P. 418,890(1) 349,075
DeAM Convertible Arbitrage Fund, Ltd. 299,208(2) 249,340
Palladin Overseas Fund, Ltd. 59,842(3) 49,868
Lancer Securities (Cayman) Ltd. 29,921(4) 24,934
Palladin Partners I, L.P. 29,921(4) 24,934
Steelhead Investments Ltd. 359,850(5) 299,208
RAM Trading, Ltd. 299,208(2) 249,340
(1) Includes 69,815 shares that may be acquired upon conversion of additional
debentures that the selling stockholder has an option to acquire, which option
is exercisable within 60 days of May 31, 2002.
(2) Includes 49,868 shares that may be acquired upon conversion of additional
debentures that the selling stockholder has an option to acquire, which option
is exercisable within 60 days of May 31, 2002.
(3) Includes 9,974 shares that may be acquired upon conversion of additional
debentures that the selling stockholder has an option to acquire, which option
is exercisable within 60 days of May 31, 2002.
(4) Includes 4,987 shares that may be acquired upon conversion of additional
debentures that the selling stockholder has an option to acquire, which option
is exercisable within 60 days of May 31, 2002.
(5) Includes 59,842 shares that may be acquired upon conversion of additional
debentures that the selling stockholder has an option to acquire, which option
is exercisable within 60 days of May 31, 2002.
On April 15, 2002, we and the initial purchasers of the debentures entered
into a registration rights agreement. That agreement requires that we make this
prospectus available to the selling stockholders, subject to the exceptions
described below, until the earlier of:
- the date when all of the securities have been publicly sold under this
prospectus or Rule 144 under the Securities Act of 1933; and
- the date when all the securities remaining to be sold under the
prospectus may be resold under Rule 144(k) of the Securities Act of
1933.
This time period is referred to as the registration period.
We may require the selling stockholders to suspend the sales of the common
stock offered by this prospectus upon the occurrence of any event that makes any
statement in this prospectus or the related registration statement untrue in any
material respect or that requires the changing of statements in these documents
in order to make statements in these documents not misleading. We will be
permitted to suspend the use of this prospectus:
- in connection with pending corporate developments, public filings with
the Securities and Exchange Commission and similar events, for a
period not to exceed 15 consecutive business days or an aggregate of
45 days in any twelve-month period; or
- in connection with any proposed or pending mergers, acquisitions,
financings or similar transactions, for a period not to exceed 30
consecutive business days in any twelve-month period.
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In the event that:
- the registration statement of which this prospectus is a part is not
declared effective by August 14, 2002; or
- before the end of the registration period, this prospectus is
unavailable for periods in excess of those set forth in the preceding
paragraph;
(each of these is deemed to be a registration default) then we will pay
liquidated damages to the holders of the debentures or holders of common stock
entitled to be sold under this prospectus that are affected by the registration
default, as applicable. These liquidated damages will accrue:
- for the first 30-day period in which a registration default occurs
(prorated for any period less than 30 days), at the rate of 0.5% of
the principal amount of the debentures then held by the holder; and
- for each 30-day period in which a registration default exists
thereafter (prorated for any period less than 30 days), at the rate of
1% of the principal amount of the debentures then held by the holder.
V. PLAN OF DISTRIBUTION
The common stock being offered by this prospectus may be sold from time to
time to purchasers directly by the selling stockholders listed in the table set
forth in "IV. Selling Stockholders" or, alternatively, through underwriters,
broker-dealers or agents. The selling stockholders may offer the common stock at
fixed prices, at prevailing market prices at the time of sale, at varying prices
or at negotiated prices. These sales may include short sales and may be effected
in transactions, including cross or block transactions:
- on any national securities exchange or quotation service on which the
common stock may be listed or quoted at the time of sale;
- in the over-the-counter market;
- in transactions other than transactions on an exchange or
over-the-counter market; and
- through the writing of options or other derivative contracts.
In connection with sales of the common stock, the selling stockholders may
enter into hedging transactions with broker-dealers, who may in turn engage in
short sales of the common stock and deliver them to close out the short
positions, or loan or pledge the common stock to broker-dealers that in turn may
sell them, pursuant to this prospectus.
The selling stockholders and any of their brokers, dealers or agents who
participate in the distribution of the common stock may be deemed to be
"underwriters," and any profits on the sale of the common stock by them and any
discounts, commissions, or concessions received by any brokers, dealers or
agents might be deemed to be underwriting discounts and commissions under the
Securities Act of 1933.
To the best of our knowledge, there are currently no plans, arrangements or
understandings between any selling stockholder and any broker, dealer, agent or
underwriter regarding the sale of the common stock by that selling stockholder.
At any time a particular offer of common stock is made, a revised
prospectus or supplement, if required, will be distributed that will set forth
the aggregate amount of common stock being offered and the terms of the
offering, including the name or names of any underwriters, dealers or agents,
any discounts, commissions and other items constituting compensation from the
selling stockholders and any discounts, commissions or concessions allowed or
reallowed or paid to dealers. Any supplement and, if necessary, a post-effective
amendment to the registration statement, of which this prospectus is a part,
will be filed with the Securities and Exchange Commission to reflect the
disclosure of additional information with respect to the distribution of common
stock. In addition, the common
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stock covered by this prospectus may be sold in private transactions or under
Rule 144 rather than by this prospectus.
We have agreed to indemnify the selling stockholders against specified
liabilities under the Securities Act of 1933 and to pay substantially all of the
expenses incidental to the registration, offering and sale of the common stock
to the public other than commissions, fees and discounts of underwriters,
brokers, dealers and agents.
VI. LEGAL MATTERS
Richard G. Cutter, Esq., our Vice President, General Counsel and Secretary
will pass upon the validity of the common stock offered by this prospectus.
VII. EXPERTS
The financial statements of CTS incorporated in this prospectus by
reference to the Annual Report on Form 10-K for the year ended December 31, 2001
have been so incorporated in reliance on the report of PricewaterhouseCoopers
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
VIII. WHERE YOU CAN GET MORE INFORMATION
A. AVAILABLE INFORMATION
We file reports, proxy statements and other information with the Securities
and Exchange Commission. You may read and copy this information at the public
reference facilities maintained by the Commission at the Commission's Public
Reference Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549. You may obtain information on the operation of the public reference room
by calling the Commission at 1-800-SEC-0330. Our filings are also available on
the Commission's web site on the Internet at http://www.sec.gov. The New York
Stock Exchange also allows you to inspect and copy reports and information about
CTS.
Statements in this prospectus concerning the contents of any contract,
agreement or other document are not necessarily complete. If we filed as an
exhibit to any of our public filings any of the contracts, agreements or other
documents referred to in this prospectus, you should read the exhibit for a more
complete understanding of the document or matter involved. You should rely only
on the information incorporated by reference or contained in this prospectus. We
have not authorized anyone to provide you with different information. We are not
making an offer of the common stock in any state where the offer is not
permitted. You should not assume that the information in this prospectus is
accurate as of any date other than the date set forth on the cover.
B. INCORPORATION OF DOCUMENTS BY REFERENCE
The Securities and Exchange Commission allows us to incorporate by
reference into this prospectus information that we have filed with the
Commission. This means:
- incorporated documents are considered part of this prospectus;
- we can disclose important information to you by referring you to those
documents; and
- information that we file with the Commission will automatically update
and supersede the information in or incorporated by reference into
this prospectus, as described below.
We will make documents incorporated by reference available to you without
charge upon your oral or written request. Requests for those documents should be
directed to CTS Corporation, 905 West Boulevard North, Elkhart, Indiana 46514,
Attention: Vice President Investor Relations, telephone (574) 293-7511. We will
not include exhibits to these documents, unless you specifically request them or
the exhibits were specifically incorporated by reference.
This prospectus incorporates by reference the following documents:
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- Annual report on Form 10-K for the year ended December 31, 2001, dated
and filed with the Commission on March 18, 2002;
- Quarterly report on Form 10-Q for the quarter ended March 31, 2002,
dated and filed with the Commission on April 30, 2002;
- Current reports on Form 8-K:
- dated and filed with the Commission on February 1, 2002;
- dated and filed with the Commission on February 5, 2002;
- dated and filed with the Commission on February 7, 2002;
- dated and filed with the Commission on March 1, 2002;
- dated and filed with the Commission on April 18, 2002;
- dated April 19, 2002 and filed with the Commission on April 22,
2002; and
- dated April 22, 2002 and filed with the Commission on April 30,
2002.
- Proxy statement, dated and filed with the Commission in definitive
form on April 18, 2002, with respect to the information required by
Items 401 (management), 402 (executive compensation), 403 (securities
ownership) and 404 (certain relationships and related transactions) of
Regulation S-K promulgated under the Securities Act of 1933 and the
Securities Exchange Act of 1934;
- The description of our common stock as set forth in Exhibit (99)(a) to
the annual report on Form 10-K for the year ended December 31, 2001,
dated and filed with the Commission on March 18, 2002; and
- The description of the rights to purchase common stock and/or
preferred stock contained in the registration statement on Form 8-A,
dated and filed with the Commission on September 1, 1998, as amended
on April 22, 2002.
We are also incorporating by reference additional documents we may file
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934 after the date of this prospectus and before the termination of the
offering. This additional information is a part of this prospectus from the date
of filing of those documents.
Any statements made in this prospectus or in a document incorporated or
deemed to be incorporated by reference in this prospectus will be deemed to be
modified or superseded to the extent that a subsequently filed document which is
also incorporated or deemed to be incorporated by reference in this prospectus
modifies or supersedes the statement. Any statement so modified or superseded
will not be deemed, except as so modified or superseded, to constitute a part of
this prospectus.
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